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Effects of an Education Reform on Household Poverty and Inequality: a Microsimulation Analysis on the Free Senior High School Policy in Ghana

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Effects of an Education Reform on Household Poverty and Inequality: a Microsimulation Analysis on the Free Senior High School Policy in Ghana A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Adu-Ababio, Kwabena; Osei, Robert Darko Working Paper Effects of an education reform on household poverty and inequality: A microsimulation analysis on the free Senior High School policy in Ghana WIDER Working Paper, No. 2018/147 Provided in Cooperation with: United Nations University (UNU), World Institute for Development Economics Research (WIDER) Suggested Citation: Adu-Ababio, Kwabena; Osei, Robert Darko (2018) : Effects of an education reform on household poverty and inequality: A microsimulation analysis on the free Senior High School policy in Ghana, WIDER Working Paper, No. 2018/147, ISBN 978-92-9256-589-3, The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki, http://dx.doi.org/10.35188/UNU-WIDER/2018/589-3 This Version is available at: http://hdl.handle.net/10419/190194 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu WIDER Working Paper 2018/147 Effects of an education reform on household poverty and inequality A microsimulation analysis on the free Senior High School policy in Ghana Kwabena Adu-Ababio1 and Robert Darko Osei2 December 2018 Abstract: The level of income can be directly inferred from the level of education, making education an important variable as a key determinant of better livelihoods and poverty alleviation. However, in most developing countries education is not accessible to all. In Ghana—although basic education is largely free—for secondary education this was not the case until recently. Hence, the high tuition fees and other scholarly expenses continue to be a burden on parents and guardians. The problem was further compounded when government subsidies to upper secondary institutions were delayed. It is not surprising that the government has decided to provide this service as a public good to the benefit of all. In the 2017/2018 academic year the government began an educational reform policy to fully absorb the cost of Senior High School and vocational education for any student who qualifies. Seeing this as a form of benefit to households, this study provides an analysis of the effect of the reform on household poverty and inequality. Analysis is based on the Ghana Microsimulation Model which has the Ghana Living Standards Survey - Round 6 as its base input data. Results provide policy makers with some good ex-ante evidence on the extent to which the reform is contributing to lessening the burden of vulnerable households. Keywords: education reform, microsimulation, GHAMOD, poverty JEL classification: D61; H23; H31; O12 1 Institute of Statistical, Social and Economic Research (ISSER), University of Ghana, Accra, Ghana, corresponding author: [email protected]; 2 ISSER, University of Ghana, Accra, Ghana. This study has been prepared within the UNU-WIDER project on ‘SOUTHMOD – Simulating Tax and Benefit Policies for Development’ which is part of the Institute’s larger research project on ‘The economics and politics of taxation and social protection’. Copyright © UNU-WIDER 2018 Information and requests: [email protected] ISSN 1798-7237 ISBN 978-92-9256-589-3 Typescript prepared by Ans Vehmaanperä. The United Nations University World Institute for Development Economics Research provides economic analysis and policy advice with the aim of promoting sustainable and equitable development. The Institute began operations in 1985 in Helsinki, Finland, as the first research and training centre of the United Nations University. Today it is a unique blend of think tank, research institute, and UN agency—providing a range of services from policy advice to governments as well as freely available original research. The Institute is funded through income from an endowment fund with additional contributions to its work programme from Finland, Sweden, and the United Kingdom as well as earmarked contributions for specific projects from a variety of donors. Katajanokanlaituri 6 B, 00160 Helsinki, Finland The views expressed in this paper are those of the author(s), and do not necessarily reflect the views of the Institute or the United Nations University, nor the programme/project donors. 1 Introduction The stock of human capital can be directly linked to the level of earnings or income of an individual. This is attributed to the fact that an employee is rewarded to the extent where the additional return on investment is positive. Thus, if the value of human capital employed—wages paid—is higher than the return brought in, the employer has an incentive to reduce wages or to reduce the human capital employed. The importance of the quality of human capital and its impact on earnings is demonstrated by the extent to which individual livelihoods can be sustained in the bid to reduce poverty and vulnerability. This quality cannot be overemphasized without the acquisition of skills which brings to bear the completion of some form of training or education in the workforce if earnings is used as a yardstick for the value of human capital. It is the belief that, with some level of education, a better life is assured. This assertion has been confirmed empirically in two ways. First, by people’s personal experience and second, through respondents’ statements concerning their life quality perception and expectations along with their level of education (Dziechciarz-Duda & Król, 2013). Apart from its inherent worth as an important developmental goal, education is also central to one's ability to respond to the opportunities that development presents (Ahmed & Del Ninno, 2002). These points largely reflect the long-term impacts of human capital on general welfare. However, for many households, investing in human capital presents immediate costs for which the returns are long-term. In reality, many poor households find it difficult to bear these short-term costs. In the bid to achieve these long-term benefits, some households will be negatively affected as they may trade off current essential consumption expenditure for education expenditure in order to improve the chance of a household breaking out of the inter-generational poverty cycle. This problem is compounded especially in the developing and less industrialized countries where policy has not been adequately formulated to encompass those households whose low-end consumption capabilities prevent them from accessing some basic social goods like education and health which tend to significantly improve livelihoods. In order to help such poor households to meet some of these expenditures, countries may offer assistance in some related basic expenditure to lessen the burden of household members. The goal in this case is to cushion households so as to displace expenditure on social goods to consumption in the short run. This also implies that poor households who might not have had resources for such basic goods need not worry about this as they are able to concentrate more on their consumption needs. In terms of the need for universal education, some policies try to lessen the burden of guardians by absorbing some costs related to feeding and sometimes boarding. The latter, considered as a luxury for certain households is a major cost component of secondary education that deters most individuals from pursuing higher education (Curto & Fryer Jr, 2014). With policies defraying such costs for low income individuals, poor households will be afforded additional resources to improve consumption capabilities. Such policies have been a part of international development and have gone a long way to promote access to education, enrolment, and retention, especially in developing countries (Bennell, 2002). Ghana being a developing country has also made (and continues to make) various efforts to promote the literacy levels of its citizens. A policy such as the Free Compulsory Basic Education (FCUBE) was instituted with the aim of promoting basic education in the country. Considerable efforts have been made to promote the level of literacy in the country to the effect that in 2015 1 the previous literacy level of 57.9 per cent recorded earlier in 2000 had increased to 76.6 per cent (Knoema, 2017) due to the increasing number of investments going into the sector. This has greatly transformed the thinking of the citizenry as shown in trends of lifestyles, voting pattern, as well as social commentating. In the words of Nussbaum (2006: 387) nothing could be more crucial to democracy
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